EDITORIAL: Focus attention on ailing economy

With the legislature on Wednesday approving the government’s plans to ease restrictions on the import of beef containing residues of ractopamine as well as levying a capital gains tax on securities transactions, it is time for Taiwan to refocus its attention on a more pressing issue — the economy.

Thus far, the economy has not fared well this year and it seems that more bad news lies ahead.

In foreign trade, export orders contracted 0.91 percent in the first six months from a year ago and the Ministry of Economic Affairs warned last week that the global economic slowdown, the persistent eurozone debt problems and weakening demand in emerging markets would continue to weigh on export recovery prospects into the second half of the year.

Last month, customs-cleared exports also contracted for a fourth consecutive month from a year ago, dragging down first-half exports by 4.74 percent from a year ago and making Taiwan the only country to register falling exports compared with major trading partners such as the US, China, Japan, South Korea and Singapore. The government’s target of achieving an annual increase of between 8 and 10 percent in exports seems nothing but a dream.

On the domestic front, revenues for the wholesale, retail, and food and beverage sectors in the first six months were 0.58 percent lower than the same period last year, indicating that economic uncertainties and the slump in stock market values have prompted consumers to cut back on their spending.

It is worth noting that local businesses’ demand for imported equipment as well as the nation’s private investments have both weakened in the past 12 months, which is clearly an unwelcome sign for any future economic recovery.

On Friday, the Council for Economic Planning and Development concluded that it was less likely the economy would improve significantly in the near future given its latest data on leading indicators, which showed that there is still weak growth momentum in the economy.

The latest consumer confidence index reflects the fact that people’s faith in the overall economy and their personal economic circumstances have dropped for three consecutive months. This year could be one of the most challenging that the economy has seen in the past half a century.

To buoy falling levels of consumer and business confidence, the government has said it would provide short-term stimulus packages to bolster the economy.While stimulus measures may have a positive impact in the short term, they will not be strong enough to ensure a full-scale economic recovery in terms of industrial structure and national competitiveness.

Moreover, as the government has shown an intention to promote greater domestic investment by both Taiwanese and foreign businesses, it must also take a more aggressive role in expanding public investment to speed up slowing economic growth and stimulate the labor market.

Based on the Directorate-General of Budget, Accounting and Statistics’ May projections, government investment is forecast to contract 11.38 percent to NT$427.2 billion (US$14.2 billion) this year from last year, compared with a 0.39 percent increase in public enterprise investment and a 0.52 percent growth in private investment. This means Taiwan will witness a third annual decline in government investment after seeing 15.94 percent growth in 2009.